Thomas Pascoe worked in both the Lloyd's of London insurance market and in corporate finance before joining the Telegraph. He writes about the financial markets. His email is thomas.pascoe@telegraph.co.uk and his Twitter address is @PascoeTelegraph

Drill deeper and the GDP numbers give cause for concern

The headline news is good. In the third quarter of the year, British GDP grew 1 pc. This is the fastest rate of growth since Q3 2007 when the crisis began. The economy has recovered to a fraction short of where it was in Q3 2011, wiping out three quarters of recession. However, George Osborne would be well advised to remain sober in his celebrations. The underlying data reveal causes for concern over the Coalition's ability to deliver its economic objectives.

Firstly, state spending is still growing faster than the economy as a whole. Spending by the Government increased 1.6 pc in the last quarter; the quarter before that it grew at 0.3 pc even though GDP fell -0.4 pc. The state is not shrinking – it is not even staying the same size. While sales of Olympic tickets are bundled in with "Government & other services", obscuring the picture somewhat, the 2.5 pc rise year-on-year in the category at a time of stagnant spending tells its own story.

Secondly, the rebalancing act has not really happened. Government contributed 0.4 pc of the 1 pc rise, financial services contributed 0.3 pc, the big drivers of the British economy pre-crash were big finance and big government. We are still dependant on both.

Thirdly, the construction revolution which was meant to drag us from the precipice has not happened either. Construction was down -2.5 pc last quarter. It fell -5.9 pc in the first quarter of the year and -3.0 pc in the second. Britain isn't building.

There is no doubt that the general economic situation has improved in the last two months. Inflation is down, employment is up, deficit growth is slowing (clasping at straws there) and now headline GDP is healthy. The bigger question now is whether the movements driving each of these is sustainable. Employment is growing because of part-time and low paid jobs, GDP is growing because of Government spending, and inflation is falling only because disposable incomes are now too pinched to be pulled further. Perhaps Mr Osborne should remember the words of another financial genius: "much has been done, but there is much still to do".